#AskTLS: How Should I Divide Up My Income?

Hi there! Thanks for sending in your question, and I believe many of the readers will benefit from your question! I gather that you have not set up a budget to track your spending or savings, etc. This can become a very worrying issue as time goes by because you may end up in a situation where you’re constantly out of money or in your case, even possibly miss the opportunity to run a business should the opportunity come by because you lacked the money to start! But fret not, it’s never too late to start!

Step 1: Define A Goal

I think budgeting would not work if you do not have a clear-cut goal on what you want to achieve and where you want to be. A budget is a great way to discipline your spending to ensure that you meet your financial goals. In your case, I see that you are keen to start a small business of your own eventually. This would serve as a great motivation for you since you have already defined a goal for yourself. Now, you need to find out how much would it cost to start the small business, and when do you want to establish it. Create a timeline so you can estimate how much you should be putting aside to achieve your goal when the time comes.

Step 2: How Much Does Your Goal Require?

Now that you know how much it would cost and when you want to achieve it, it becomes very simple! For example, your are earning $1000 a month, and your goal requires you to have saved up $10,000 in 2 years(24 months). Taking $10,000/24, we know we need to save a minimum of $416.67 per month for you to eventually reach $10,000 by the end of two years. Since you already know exactly how much you need, then make it a point to put aside $416.67 each month when you receive your salary and promise yourself to never touch that money!

Step 3: Track Your Savings Goal

Now, what good is saving when you can’t monitor your progress? Monitoring is important because it gives you to motivation to carry on, especially on periods where you feel strapped for cash and it becomes a chore to save. You would then look at how close you are to your target and remind yourself that you have come too far to give up! Create an excel spreadsheet so that you can record down your month-by-month progress and watch you inch closer towards your goal, with full expectancy that you will reach it when you diligently put aside that $416.67 per month.

Step 4: Worry About Your Savings And Let The Expenses Worry For Itself

Too often, youths especially, spend first and then save the rest. Here at TLS, we advocate saving first to meet your goals, then leaving the rest as budget for your personal spending. Knowing that you have set aside a portion of your savings to meet your goals, removes the burden of worrying that you might overspend.

You might feel a pinch if you’ve been spending all of your money every month without any elements of saving, but it’s only normal, and let that pinch remind you that you’re reaching your goal! Give yourself some time to adjust to this new budget, but stick to the program! If you feel the need to automate your savings, speak to your bank officer and request for a sub-account to make automatic monthly transfer into that account so you will not be tempted to even touch that money.

Step 5: Rinse and Repeat

Enough said, repeat Step 2 to 4 until you achieve your target.

Kicker: How To Grow Your Money

I understand part of your question also included on ways to grow your money via investments, etc.

Until you have mastered the above 5 steps, then should you be thinking about investments. Because without money, you got nothing to grow! But nonetheless, I can see that you are interested in taking charge of your own finances, which is a really good sign! One of the most common ways of growing money is by investing in stocks listed on the Singapore Exchange (SGX), where you can buy a piece of the business and watch it grow in value. In simple terms, how money is made is by buying Stock ABC for $1 and selling it for $1.20 when it grows in value, profiting $0.20 per share.

Taking the above example into context, it would mean taking $1,000 and buying 1,000 shares of Stock ABC at $1 each, and selling that 1,000 shares at $1.20 each, profiting $200.

There’s a lot more to investments and we will be writing posts around this topic, so remember to subscribe to our website and never miss a post!

Aloysius Lee

Aloysius has been investing in Singapore Equities from the age of 18 and is still madly enthusiastic about it. He strives to sharpen his edge while guiding others along the way to snowball their way to financial freedom!